Commentary

Programmatic Is Failing Forward

Here are three reasons programmatic is failing:

Reason #3:  Prices Will Always Go Down

Programmatic revenue earned by publishers fluctuates based on fill rates.  Publishers will invariably lower their floor prices to increase their fill rates as the end of a quarter nears, in an attempt to get to their quota.  Nothing is ever going to reverse this from happening.

Additionally, programmatic is exclusively about ad performance.  Prices may rise for moments in time, but ad performance will always bring prices back down. A cost-per-action goal is arbitrarily set by an advertiser (or agency).  

Whether it’s a cost-per-click of under $5 or a cost-per-customer-acquisition of $125, the buyer's goal is to deliver a lower cost per action than the year or quarter prior.  Paying a lower price for the display of the ad is the easiest lever to pull to meet these lower-cost-per-action expectations, and publishers selling programmatically will always lack leverage to stop that from happening.  

advertisement

advertisement

Lastly, programmatic prices will always go down because of the constant glut of supply. The idea of bidding for each impression looked good on a whiteboard and in a patent application.  In reality, there will never be enough advertisers bidding to overcome this oversupply problem and cause prices to rise.

Reason #2:  Programmatic Numbers Have Question Pox All Over Them

Is the data used to target ad impressions latent, which is a fancy way of saying, did ad impressions for a hotel chain get wasted on people who already booked their rooms?  Are impression delivery numbers artificially inflated because of bots?  Did ad impressions appear on unsafe sites or in unsafe placements on sites considered safe?  Were programmatic impressions served but not seen?  Did autoplay dramatically pump up the number of programmatic pre-roll video ads viewed?  Did any of these programmatic video pre-roll ads run prior to unsavory content?  Were 100% of the clicks reported on programmatic mobile display ads accidental?

The answer to every question above is "yes." 

Reason #1:  Even if You Could Show Clients Their Ads, You Wouldn’t

When I bought print media, we sent clients checking copies so they could see their own ads.  Our clients consistently asked for additional copies to share with their bosses and other executives at their company.

The biggest reason why programmatic online advertising is failing is that even if you could, you would never show 95 out of 100 programmatic ad placements to the clients who paid for them.

First, programmatic ad impressions are disconnected from the content in which they appear, so they always look foolishly out of place.  Two, most programmatic ads appear either in terrible placements on premium publishers, or on terrible sites clients would never buy direct.  Three, all programmatic ads appear with way too many other advertisers on the same page view.  

You would never show clients any of these kinds of ad placements because if you did, they would feel worse about their investment, not better.

Not showing advertisers their own ads has been the elephant in the programmatic room from day one.  The minute clients like Marc Pritchard at P&G — and others like him working for premium brands — start requesting “checking copies” of their online ads, programmatic advertising will have a huge problem.

The greatest programmatic sale has been convincing publishers to buy into selling ads this way.  Most see programmatic as our industry’s inevitable future. I look at how these ads get priced  — and, most importantly, how they appear — and see an emperor on display with no clothes on.

10 comments about "Programmatic Is Failing Forward".
Check to receive email when comments are posted.
  1. Ed Papazian from Media Dynamics Inc, May 11, 2017 at 9:25 a.m.

    Add to that the cost of programmatic buying, Ari, which is upwards of ten times what it costs to buy and service traditional media investments, and you have, yet another issue for programmatic advocates to solve---especially if they even get considered for TV buys. Also, as you imply, your typical programmatic "ad impression" in digital media is far less likely to be visible or as targeted as a buy placed directly with a publisher.

  2. Aquiles La Grave from Brandzooka, May 11, 2017 at 11:01 a.m.

    With all respect to Ari, he’s wrong, but not just wrong he is dead wrong. The simple fact is that the battle for or against Programmatic has been fought and Programmatic won, handily. Here’s why - you can come up with all sorts of reasons and trends why Programmatic will fail, but the reality is that communication always flows and scales through the channels of least resistance. That is precisely what Programmatic was designed to do, and why programmatic will not only persist but thrive as analog channels plug in and go Programmatic over the next 36 months. If this want’s the case people would still buying newspapers and Ari would still be buying print ads for his customers. The trends he points to are real enough, but he presumes that they are either not fixable or that there does not exist the will fix them across the spectrum.

    Here again he is wrong, brands are demanding better performance, brand safety, transparency. As in they are less and less willing to buy trash. While audiences are demanding better publisher experiences, meaning they are less and less willing to interact on pages that have more ads than content. This means that agencies and publishers will have to adjust from a Quantitative media buying model to increasingly a Qualitative one. Don’t believe me? I just sat across the table from a Fortune 50 client who couldn’t stop smiling at the metrics we delivered vs. their agency even though the CPM was 750% higher. Then again maybe I’m wrong and will be reading the the next Op-Ed on the print version of Media Post.

  3. Ari Rosenberg from Performance Pricing Holdings, LLC, May 11, 2017 at 12:35 p.m.

    Aquiles you make some really great points thanks for taking the time to read mine and share yours -- I stand by mine and can absolutely see your points

  4. Craig Mcdaniel from Sweepstakes Today LLC, May 11, 2017 at 3:26 p.m.

    I commented on John Motavalli's commentary about much the same issues. I would to add another thought. As a publisher who has been online 14 years, I have worked very hard to honest and 100 percent legit with every advertiser. I wil sign off on every ad and to show a screen shot or link to the ad, give stats, put in tracking links and more. This is what the top Fortune consumer companies want and expect.

    Now about RTB's and Programmatics. They offer conveniences as a distributor of ads. They do care about security but are don't have any personal involvement between the buy and seller.  To me would you buy or sell a home without a Realtor or attorney? No. Then is it time to think about bringing back human involvement between the advertiser and publshers and do away with Programmatic? It's to admit it's that the lack of human intervention has been a mistake. 



  5. PJ Lehrer from NYU, May 12, 2017 at 8:53 a.m.

    Let me get this straight - either you get terrible placements or terrible sites?  And this is the best you can do?  Good luck.  More here...
    http://pjlehrer.blogspot.com/2017/04/garbage-in-garbage-out.html

  6. Ari Rosenberg from Performance Pricing Holdings, LLC, May 12, 2017 at 10:45 a.m.

    You have that right PJ.  I have read a fair amount of responses to this column telling me I am dead wrong but no one suggests how any of my points above are incorrect -- they just say that progarmmatic has already won and these issues will be resolved over time -- I highly doubt these issues will ever be resolved because they should have been solved for to begin with.  Programmatic lacks a respect for advertising.  I didn't even touch the third rail on how consumers are mugged for their data through programmatic.

  7. Craig Mcdaniel from Sweepstakes Today LLC replied, May 12, 2017 at 3:43 p.m.

    On placement, the rules were changed by Google AdSense and AdWords 4 years ago. They set out to change the number of ads from 3 above the fold (which they promoted 12 years ago and worked with me on) to 2 ads about the fold. For most publishers this is not a simple change to change your layout, contents and CSS. Google was so serious about this that they made threats against me and acted on those threats by reducing my revenue and search ranking. Forget that this is a anti-trust violation when they ask to take down a competitor.

    This whole move by Google was about the switch from desktop to mobile but also to eliminate competitors in online ads.

  8. James Curran from www.staq.com, May 12, 2017 at 2:13 p.m.

    I agree with your points Ari - #3, #2, and #1.....

    Programmatic won't fail though, it will be the pressure on the market until it hits bottom.

    What you are saying is that great brand pubs will erode until there is only social media garbage?

    -James

  9. Gerard Lechau from digital v, May 13, 2017 at 12:39 a.m.

    I generally agree with you Ari.

    Heres why: programmatic still hasn't solved what publishers ultimately need. A scalable solution that provides a good reader experience with high CPMs.

    Is it increasing in CPMs? yes but not because of anything publishers are actively doing better. Buyers are converging towards deal ids because they have to. Too much garbage on open exchange.

    Programmatic is still a buyer tool and publishers are adapting. You can see this play out with developments like header bidding, instream videos, etc..

    The chase for last click & conversions is what will kill "digital advertising". The real reason these large consultancies are moving in is because advertising no longer is effective. They're proving they can build experiences that is more enjoyable than banner ads

    -Gerard


  10. Craig Mcdaniel from Sweepstakes Today LLC replied, May 13, 2017 at 1:57 a.m.

    Gerald, you made some very good points.  However there is one that is missing in this discussion.  ST is considered the number one sweepstakes publisher in America. After 14 years I earned the title. Who is now my biggest competitor? Google and all their internet properties. Why? They get to skim off the top the best sweepstakes ads by the Fortune companies. Why? Because they set the rules.  Google gets first look at the best ads then place them on Search, Gmail, YouTube and god only knows how many more sites they have an interest in.  They can do the same in any of the top keyword searches or vanity named groups. The programmatics cannot do the same and doesn't have the resources to compete on this level.

    The only way to get this to change is get IAB to level the playing field on the rules. Not likely because Google is major comtributor to them.

Next story loading loading..